The Rittenhouse Review

A Philadelphia Journal of Politics, Finance, Ethics, and Culture

Thursday, May 12, 2005  

I Give Up

Let’s go ahead and do it because, well, it’s in the interest of, I don’t know, I give up, but I’m guessing almost nobody (“United Air Wins Right to Default on Its Employee Pension Plans,” by Micheline Maynard, New York Times, May 11):

United Airlines, which is operating in bankruptcy protection, received court permission yesterday to terminate its four employee pension plans, setting off the largest pension default in the three decades that the government has guaranteed pensions. […]

The ruling releases United, a unit of the UAL Corporation, from $3.2 billion in pension obligations over the next five years. The federal agency that guarantees pensions, the Pension Benefit Guaranty Corporation, will assume responsibility for the plans, which cover about 134,000 people.

Some retirees could see sharply lower pension payments as a result; others will see little change in benefits, depending on a variety of factors. Some retirees at US Airways, which has terminated its plans, have seen benefits drop by as much as 50 percent. […]

Along with raising that prospect, yesterday’s action has significant implications for the airline industry, which has lost more than $30 billion since 2000, and perhaps for other industries like automobiles, with similarly heavy legacy costs.

Analysts have predicted that if United won its case, there could be a domino effect as other airlines are forced to seek bankruptcy protection to bring their pension costs down to United’s levels.

That move would probably swamp the pension agency, which was created in 1974.

Oh, wait, according to the Times report there are at least two potential beneficiaries, namely General Electric Co. and American Express Corp., major short-term and junk lenders to Delta Air Lines, which is expected to follow its competitors in saddling the PBGC and American taxpayers with the results of what can only be described as pathetically inadequate management. Aw, what the hell, just blame the unions, right?

| HOME |

The Rittenhouse Review | Copyright 2002-2006 | PERMALINK |